FXLV - Earnings call transcript Q4 2021 | F45 Training Holdings Inc.

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Operator

Hello and welcome to the F45 Training Holdings Inc. Fourth Quarter and Fiscal 2021 Earnings Call. My name is Lauren, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Bruce Williams, Managing Director of Investor Relations to begin. Bruce, please go ahead.

Bruce Williams

on thank fourth joining released fXXtraining.com. quarter and be and discuss call this everyone, section can Training’s Relations FXX results, found morning, you website the for to morning of Good our Investor at the which we call Chief Officer, and hosted Adam by Chris Financial Officer, Payne. be will Gilchrist; Today’s Executive Chief

the encourage from We by may can expectations, expectations. our the discussed that be you Reform financial or to These cause we others, started, uncertainties, I statements may SEC. results those among filings These Form include, the without or of in the this also implied on and results forward-looking remarks contain are including in get of the year want release in December limitations, are these could to anticipated forward-looking that soon and our based predictions, Litigation Before materially discussion with our report involve our current earnings annual be XX, call our to filed and XX-K the factors, These including for for outside of within Private XXXX materially of risks from targets that such and mentioned. some regarding of which management's meaning on management’s actual uncertainties, a different expressed estimates, the actual these review Act to differ remind the factors XXXX. in statements. ended Securities filings performance may control on statements those substantial everyone

the results definitions believe and measures consistency non-GAAP or in information. contain useful the evaluating call of generate them supplemental of Reconciliations that core of speak obligation in statements. to update indicators for any and these only earnings, we financial reliance also provide measures comparable are undue these place period-to-period we are comparisons on peer our revise should measures You release. forward-looking and and our GAAP these and operating will non-GAAP of which to performance We as with included facilitate no today companies. results ability assist earnings measures, undertake comparability certain new This of to our past not our most

call Now, like to to Adam. would I turn the over

Adam Gilchrist

to Bruce. you, it McDonald's get trivial took long Thank thought questions FXX same [ph] and answer get to years asked took anecdotally franchise ADA didn't to? I The Strangely, know did two about was how I years. eight XX the with take answer, years McDonald's I we this eight two would which questions to recently. were, was folks. asked share it size The get I you to to FXX, it took size, the to the

has is the years get to metric in for our and long to was a know unit again, fastest answer, took which The to how myself second the didn't proud franchise to, reach it growing took eight which answer that been I Starbucks years. FXX, history staff. question, number size it Being same the take Starbucks has? of The it XX units the also did FXX same

echo this I business However, beginning. this presentation, end is just the this the point at of

the to fastest results, the both enabled quarter, in growing we as and the to year Entrepreneur FXX well strategies full our for have quarter the ranked one fitness world, on brand to fourth fitness that according continued Magazine. the business the number as franchise Moving fourth and to on boutique growth execute become

new the ended to franchises XXXX sold demonstrate XX% sales, and to year. strong franchises continued multi-unit a total XXX with we fourth pack the and strength compared and we franchise quarter, including fourth continued net increase additional equipment deals, openings in In sold, new the During studio the deliveries. quarter prior quarter,

quarter total the ended and studios, versus globally prior XX% studios increase a new net with the period. XXX XXXX opened also year We

X% to XX% fourth network. continued quarter, across experience during our increased sales Same-store the studio we in performance and the the quarter. globally strong During United States

to XX% and approximately United full XX% the million open increased $XXX during System full full $X States. studios States Global system wide year. to $XX studios to quarter the quarter million ended wide studios million XX% today wide the the million are In and wide States. and to the full XX% fourth open $XX in $XX system For and system for XX% open the X% visits during open to for our in sales U.S. of sales million to and in our for and our increased same-store our studios approximately quarter of fourth We globally and United nearly the approximately $X increased of XX% and the are increased for U.S. full United and increased with the XX% year In year XX% million sales to to quarter quarter $XXX XXX% globally of XX% the XX% XXX% and globally respectively. as million $XXX visits XX% the approximately respectively. year. the million of the year

our encouraged the studio representing one sequential our pre-pandemic most of significant long-term continued very improvements exceeding by indicators TAM. performance levels in U.S., in performance the key which third growth are with We our global is market,

that as have studios outside world to of report am and restrictions levels. we've as restrictions eased similar a in mandated in Australian being uplift over in to AUVs our government several slowly business experienced In are rest the strong quickly Australia Australia the weeks, our have Regarding studio government performances, with pleased last U.S., lifted. I mandated seen rapid pre-pandemic particular, returning recovery,

disruptions. continued year, strong full the from delivered COVID chain challenges results we despite and the supply For

what members, in best to people's communities. best year, During lives these by by workout our and was world's through changing continuing unique managed we training successfully challenges doing and the is our deliver the our for franchisees which

of for new robust worked revenue of generate consisting prior and to growth the our Over the XXX and and franchises demand to a We XXXX quarter of undrawn position, franchises EBITDA strong us strong adjusted period, allowed cash franchisees by margins debt to sheet we deliver course with net XX%. open strong sold XXXX, execution This of multi-unit we balance an supported XX% from with zero revolver. funded ended the compared a studios.

of approach fitness business, firmly and a know, As the our results. rooted new have you franchise drive This motivation, to to three from course, in partners, differentiated innovation, to of fitness we in members. pillars interest unique of approach DNA; both and course our continues

we of equipment, half pieces second the of exercises. the six During introduced year, new over XXX new and

XXXXs the over have we introduce additional next workouts to of Looking ahead, plans years. several

with fitness XXXX highly of backbone across programming best to which as our our consists best-in-class the truly scalable unique our mission movements concept offer modality over have model, serves we Our continually growing workout. exercise that portable globally. database, the fitness franchise world's a support of thrives the Coupled and

we excited of look about ahead the could forward XXXX, not opportunities we to be us. more As

are increasing being pre-pandemic returning We three X.X first customer visits time. our per restrictions visits studio, their This COVID-XX very or seeing week experiencing to in-person of as now local the lifted, that above to with in-person is for per continue as evidenced over engagement visits strengthen which fitness, week. fitness are by average to to people with metrics, are ever excited to experience as

the at open. XX/XX/XXXX, to continue of but we as pipeline by franchise franchises, be addition, not over encouraged sold yet In strong XXXX

portion comprised studios significant very said well these I'll before, unopened which experienced of of franchisees further. capitalized I've a sold, are talk As but about and multiunit

in recently end, taken As chain. we in to respect we've continue have To XXXX proactive that supply we've take discussed strategic past, to the delivery secured equipment we announced for XXXX. our and will with packs measures that

a Chris our remain As confident I'll results strategy. to in With go over it result, Studios. financial an on demand and the FXX for then to our ability robust franchisees to new turn provide update over from our I'll that, growth we satisfy

Chris Payne

start with and light it asset to invaluable franchise of make. with streams highly sale model, and reoccurring business are our believe all model. Thanks, opportunities and that driven Starting increase off results. fiscal time taking results flow is fantastic forward we today. business thrilled our our then walk streams quarter revenue, Adam. model, our reiterating Adam, to for in visible our paired XXXX footprint the for by I business reoccurring the will of be year I'll through model results our about I not year business fiscal attractiveness with the existing an by fourth turn generation. by FXX. over then and strong speak revenue more our fiscal with and and thank attractiveness cash excited franchise you global asset contracted fourth the nature and quarter and I'll going guidance and then The back year These of additional our that provide revenue I'm every us the you could to reoccurring profitability we

franchisees component the capture before, dictates our is fee of majority we monthly performing minimum to said receive well derived to allows a our our FXX's with from have case equipment fees franchise a that of typically contractual our our the revenue that I of fee sale In ensure As units. agreements franchise upside and franchisee. monthly agreements us with variable from

accelerate the and that four we pre-pandemic to U.S. above has week global AUVs are are result, continued in a As the AUV pleased levels. trailing

flow result revenue to generation. and This increase, in continue royalty AUVs recurring will capturing drive strong turn will profitability by to continue upside. As cash we in stronger

highlight to packs we Following believe XXXX Adam increased packs, point to equipment that we of which secure our I provide like world recently delivery our sufficient would stock to achieve up on targets. the purchases of approximately a raised, will

increases new purchases of environment. their yet given of opening is purchases of world from pace our equipment Additionally, acceleration logistics, the around solid franchisees continued not on strong but reflects the which bulk open us and to particular cost pack or and franchises. save demand Since expectations manufacturing mitigate enable in future inflationary the important

challenges As industries. to strong to sheet despite as supply balance manufacturing and ability inventories ongoing our chain secure leverage well across our relationships

of which a revenue eight from execution delivery, equipment agreements. between months we and franchise recognize sales upon from the is As reminder, generally our six

which full total by pack Now increase studios open in $XX a fourth results. new year XXXX. world quarter increased significant turning principally Fourth quarter prepared as driven our to revenues to our deliveries, XXX% to and franchisees million, was in

Additionally, most towards end increase of the most relaxing without with COVID-XX operate of despite disruptions, XXXX was of globally. cases restrictions our network to the able

million. XX. global of to which to Fourth year base, XXXX XX, to XX% full was increased increase increased of in franchise million. XXXX For increased $XXX record to XX% as as the XX $XX.X by revenues quarter an December December driven a XXXX by The XX revenues studio increase total our XXXX

increase fewer customers. our COVID-XX strong positive particular in addition, revenues franchise States, in the United provided related in the supported to sales, credits same-store In was and by fee

franchise year, $XX.X increased XX% full to the For revenues million.

sales same-store same As systemized sales X% to $XXX Adam XX% for increased in global the the noted, fourth with increasing million global quarter period.

are partially the to U.S. quarter. largest These during sales We Australia that the same-store impacted market XX% the related which as recover increased during and U.S. offset pandemic. the COVID is ROW results fastest from were our quarter pleased by partially which continues the the and restrictions were by results in market, growing

COVID global wide was the system was $XXX wide Australia, XX% driven system For the as ROW increased challenged visits increased the XX% select driven U.S. X% Canada full XX% visitation in restrictions the in and year, growth to driven fourth this XX% the same-store increased UK, in sales as million global in increased offset traffic Lower such quarter. by global wide system In in well U.S. COVID-XX due Australia to visits. the partially by visits growth Again, markets, where sales and fourth as restrictions. studio quarter, by

delivery increased XXX the million from to For the visits. in growth by and the XXX% the increased wide quarter during increased led full packs visits from of The revenues U.S. over equipment the by increase primarily Fourth world the driven prior quarter fourth $XX.X XXXX. period year year was quarter. XX% XXX% system XX% of

$XX.X XXX% contribution to world revenues restrictions For equipment in quarter subject million. AUVs, to increase by deliveries to to well an of the an COVID-XX percentage Australia greater deliveries the revenues from increased million, accelerated period. royalties. increase modest compared studios compared the as increased resulting driven world $XX.X studios million to a due Rest by and equipment to as of fourth XXX% in equipment to openings, $X.X prior year, and to Geographically, revenues revenues pack to prior deliveries million, studio studios period. strong accelerating higher XXX% XXX% not full to increase in U.S. $XX.X increased

franchise During quarter, and the XXX a sold globally net opened studios XXX we basis. on

globally. globally new a XXX the opened studios we For full net sold franchises year, XXXX and studios of total for XXX

but but sold are XXXX yet partners. had studios not capitalized As XX, concentration the with XX, sold U.S. of The our XXXX over of well attributed highest these market. not yet December with to majority we XX franchises franchise opened opened the multiunit in

per of XX, For additional increased per In context, sold XX XX franchises the to the per global of increased month. XX, month. XXXX to average average the per the the of month XXXX sold ahead average U.S. month net of well net ahead average franchises

XX% owned as multiunit as franchisees, approximately demand December In by of franchise from of and franchises XX, for addition, XX% sold XX% December XXXX, multiunit approximately of strong XX, which the highlights market were our opportunities. XXXX up

reflect the quarter the gross margins. margin increased based in Gross $X.X to of was as year. compared to equipment XX.X% driven $XX.X last by fourth million delivery was of the one from the profit year mix the XX.X% in rebate in quarter, Moving well compared the profit the full of year. margins on to in related increase higher in million fourth quarter greater gross quarter, segment revenues in margin Improvements The as year-over-year from volume equipment suppliers margins our to equipment but improvements primarily fourth franchise profit, gross volume. last

Texas, to year a For the million to to well to SG&A XXXX in was compared ago. the the SG&A million increase expenses million one-time compared legal expenses corporate compensation, $XX.X the compared XX% including profit transaction $XX.X fees. expenses was and stock-based as gross in relocation quarter primarily due and was million margin to year. year headquarter Austin, to $XX.X related gross prior profit move for in $XXX.X The was the as full XX.X%

Excluding SG&A support personnel increase to investment to and investments. one-time in due costs increased growth and infrastructure our marketing

increased XXX%, increased expenses public For the growth costs and other company SG&A costs, one-time year, over investments. reflecting full strategic marketing

reflects XX% a height reduction QX FXX in pandemic EBITDA quarter $X.X XX.X% comparison. increased add cost in Adjusted Adjusted margin during versus increased was measures, year-over-year XXXX. gross improvement taken I The $XX.X significant in margin the during fourth the impacts price year XXXX, that of Additionally, earlier. margin the prior would from million in XXX% mentioned the EBITDA to EBITDA the period. million adjusted had which

pay the million XXX% adjusted the almost over $XX.X to Adjusted million year, For margins to compared in increased full basis EBITDA $XX quarter the to in reflecting in interest $X.X IPO the concurrent year. Net down with XX.X% XXX increased $XXX,XXX, expense compared XXXX. points for occurred that was compared July XXXX. our EBITDA prior XX.X% year, million to fourth last to significant debt

million net primarily year, $X.X was compared XXXX. expense full debt was discussed the interest the For $XX.X we million and quarter. penalties to last increase to off discount related This in write

$XX and to equivalents no we the of outstanding. balance Turning debt cash million year sheet, with approximately and cash the ended

bulk revolver As as I of partially on today, have our the equipment we of earlier. part purchase discussed drawn of

result, to strategic as fund are a we strong Our in and liquidity and strategic capital priority. invest with flexibility our may current We and a several capacity. remains this structure our revolver we initiatives believe provides growth comfortable

commitment $XX $XX invest additional that facility today. is continue of Active. million growth with Crew, Avalon FSX, provides such as of to To accordion which of Our Vive modalities brand an available for million our in $XX acquired Malibu as we our end, and million House and credit will

a and targets to as in is In which and owned be number These of these addition will stores, these for limited demonstrating modalities. company-owned modalities to in in reflected U.S. overall to capital our proof-of-concept to company guidance, driving necessary expenditures as modalities. SG&A invest will financial stores these primarily successful growth FXX, critical the make of the we open

establishing strategic strong to studios. We number a on FXX across acquire studios company of capital. opportunistically of small drive be existing portfolio and look a we'll will modalities that importance on of limited believe Finally, invested return

net or moving of approximately full we on increased openings XXXX. no initial year full to assuming worsening related materially to solid guidance, geopolitical XXXX, impacts net significant pandemic performance, of studio uncertainties, Now the that risks year expect of approximately franchises

those year off between full of and the year. cadence and be $XXX between to expect EBITDA million Full million adjusted of $XXX weighted the million towards and year $XX openings back million. $XXX We revenues the

measures included back comparable our these and indicators a the now I'll XX-K of to reminder, most release. from in of measure over non-GAAP in to a our As call and GAAP are quarterly our the earnings turn reconciliation report Adam. definitions

Adam Gilchrist

Great, thank you, Chris.

sports Athletics. appointment stars, First, some appointments I'm share of quarter. of as as during someone legend I Brady, Chief and and we on He and to a true Kevin business, Having month, the and champion excited to fitness Tom our built athletes color long in professional more to board. and be and asset announced various Peterson Hollywood a regarding him is be admired. Gunnar Kardashians, invaluable the executed career excited initiatives have we the going an around is such Love, training upon first Last have to the Gunnar we couldn't industry

take to significant continue the like with to is some that growth to opportunity footprint. whitespace and our long-term long-term the discuss I'd studio we expand franchise meaningfully Starting believe Now outlook. U.S., in to our time opportunity there

all is of opportunities have that opportunities the closed secure facilities the the attractive locations to our all estate pandemic. franchisees. FXX mentioned, highly our for believe to that long-term additional As December XX of there goals, estate our with to States. estimates the fitness the we IHRSA confidence as our analysis, studios continue U.S. of in Chris pandemic, internal estimates, be us What XX, Since XXX for is over us studio in and there onset the course emerged we of have achieve had already real studios franchises to total allowing XX, real in potential XXXX long-term U.S., on whitespace Based the United new the of XX% over sold XXXX gives

was franchise XX our simple in open, time include and mean does demonstrated exactly long-term XXX potential allows over studios channels, including have their day and of FXX our growing studio our certainly almost potentially meaningful spend and portability model and more make franchisees franchises This and of we this XXXX markets model opening over purpose military related more franchise very simple total the operate. other to studios We to XXX was their one, scalability. countries. to not the Outside the Since U.S. with whitespace simple. by core of TAM What studios. to around Importantly, our sold, Australia, figure the brand our colleges. built business does

Looking to footprint ahead, as franchisees we emerging to in continue intend as new markets. existing our and grow with both well developed

to demand existing we Turning new new continue franchises, for market both see and to demand strong franchisees. multiunit from

range to partners to who footprints build to scale. seeking expand capitalized from of franchise looking existing institutional multiunit Our are partners studio footprint franchisees their well studio

During operator franchises groups. XXX the we owned multiunit quarter, or across multiunit fourth three added franchise

franchisees, multiunit As of of owned our franchises up from were December XX, approximately by is the XX% approximately which end XXXX. of XXXX, as sold of XX%

sales Going capitalized franchise drive forward, we larger, multiunit continue will to new new groups. well studio and openings franchise with

real has side, that real identifying optimized leases CBRE manner. negotiating partnerships and created a in estate On and strategy streamlined our to have a our to new by estate franchisees we establish leveraged for create value with the will continue us and

identify which new in studio franchise CBRE of As helped from openings, to driving on closing agreement prospective opening. a a locations, over takes the today, studio has time new significant and reducing provides efficiencies XXXX

our to the execute members an best to Lastly, single on franchisees day. our world's offer we every opportunity workout and mission continue business our offer incredible

in sharing We for like would open you and folks exciting up forward developments future. with to Q&A. are it With I to more we're started only getting looking that, just the many

Operator

Hornbuckle Thank John Guggenheim Partners. first you. from [Operator ahead. please Our comes from John, Instructions] go question

John Hornbuckle

of service we have the the don't that how drive -- progressing think brand to maybe, two, are I to me your think room for to you start So do secondly let we let's bit year now the with one you as better, want how the down right. then how Is get that Adam, right? and think really relative gotten performing, as for guys member we're awareness AUV annual about AUV, always any pricing, go exactly, you you what felt think that, little or you to level? are XXX,XXX there say, that a speak post-COVID has about to adoption to when the So, sharper then path? XXX,XXX the that pricing to studios ramp, pricing And more past

Adam Gilchrist

Two, Yes, annum moment good XXX the we're ramp that What to to thanks, code it three years. moving of questions. to per back really we're at with pre-pandemic back John. AUV seeing zip the regard AUV the call gross is

we to support for with to to we up, we us, was I our important that call, obviously aren't visitation membership, regard franchisees are metrics back seeing but everything we probably the see would that earlier those us over of as and with we're yet greater pre-pandemic, So regard for that most argue still in just than sales can do to mentioned, being XX%, growth, it we I one and but is the XXX% have.

full So, in of six levels to believe be achieved a pre-pandemic within that summary, we'll profitability back with years, call it three being of ramp months. we

to with members, attract, of we which week, to and gone is, volume consider does membership some second to down what potentially great $XX to We've is able they've catastrophic The obviously your answer the to membership the part grows question, is attract able easing mistakes of not. your that some to fee peers, where be our be $XX absolutely base. a then seen should or

have only spots example requested we AM. be that of in certain so a XXXX you you can't at if location, XX Monday sessions. all stuck where signed class in that what X busiest time, in members situation morning. a to would those is is An you're However, people a morning are that happens our a many available booking have training facilitate at We

because you can't membership train. in they have backlash, time a actually to So it book because counterproductive, becomes

to XXX and But XX,XXX. a up XX the XX more classes, can't right, always targeting we've importantly, XXX, people. class XXX right is size size because of believed demographic stretch from your somewhere we're depending to out the that number only a So we the population of of XXX of people between on members

and want our have the these sort out So that be two, service of of enough are mapping that we always that able to believe exclusive base. where provide into science to tool we believed always people goes territories, there's we lot Number XXX a membership there that people But is and are more we you when value paying week, find more service, that. to training up respect of want importantly, members $XX that you're frequently. per to of particular turn that Ferrari we what get

If week, you're a where and you're that as business, has great as paying as using a a not XXXX year. where $X.XX you're motivated of Planet comparison sort an example a in paying

training. times So team and life hope I changing, key point I three more and week. enjoy that we up people's service lives We two slogan, do get second the believe the results of per per people we and want to to as half, training, our people that would to want more a being John, cherish change we suppose that's question. the they importantly, Ferrari answers to do turn than that, your need the

John Hornbuckle

cadence? to of Are openings in equipment later those in Is the back the that going of Secondly, that's the deliveries number XQ all or terms because right, good. view the true? pushed And some and then about been XQ into the my the then the highest quarter. of would the of openings, not year, Yes, would thought just very be in curious cadence of have just fourth I openings, be

Adam Gilchrist

we period really deliver a far the longer again. world and is when a months. it's Typically, question equipment/world three opening than good Yes, pack,

So can what between we fit and anywhere take a out find months. typically three is nine

year. up really afternoon. question cohort the we'll to that So sure anticipate we open a the that can answer appreciate you world receive simple and is fact you this QX, through don't QX see opening that I'm pack that

come do fit make site city all that do out that and You've we obviously checks compliant. to go has the got to and sure the then studio and out is the and approve to a

a getting period five one a of winded that after we And typically months with from quite number that's the four steps that in FTD they But it's answer compress the there's franchisee a answer, obviously an of to apologize, open. months signs months so six involved studio areas John, nine of the but the long receive franchisee CBRE the is opens. time a simple to to have a from world to time, So backlog pack. focus I working

John Hornbuckle

Okay, thank you.

Operator

Randy [Operator Our Connick Jefferies. Randy, please go next comes question Instructions] from from ahead.

Randy Connick

question there's what the Great, are seeing one have people I States noticed of levels. guess guys. number that around is, around yet, thanks of being heard part packed. just in not you're northeast United thing of awareness And a then, I've the classes always concept

beyond what So I'm question into just to compare levels particular follow AUVs to in it when build market. region? look Because opportunity are curious, when bases unit you increase like grow a a awareness you looked amount seems up as awareness, growing like you as have and just massive to there, you of that look relative to there's a in John's AUVs those what particular density

to work around a guys. you've curious done analyzing just relative any I'm the States? particular of region awareness So of levels AUV Thanks, in United that

Adam Gilchrist

again standpoint, great that X anywhere week do and got convert question think know, typically a top of Randy. membership X sort of between and goes you it as more out that XX because brand Yes, your inquiry, without awareness you've saying mind trial. and will two I grow you awareness it's folks a AUVs I from build will that of

speaking size best very large try to able mark continue here, the obviously large very saying brought a folks you'll to just and to we this on what When with XXX without example had great to inquire we we lots So discuss about that sentence goes cockroach of impact our that Australia, franchise. to we have household wave with U.S., people about task especially it's the huge board, internally economy also marketing XXX With accelerate talk large of in do with we're it buying What the had we this a moment a be the tremendous to and micro effect. the likes California, members, we exposure, inquiry and for smaller the but had awareness where a of huge campaign, in over Wahlberg is million a in it's wanting is areas we partner to million fitness, folks. And, of find name. doing have more very population And regard at be amounts when I of people will not of across same have is, be FXX. influences.

grow example, grow. believe to do our as excellent continue we that So an we the in Northeast awareness is AUVs key markets, will

one sign point there we is members. Fitness, can't out members, like like a XXXX thing Planet a to ceiling on XX,XXX fact sign that However, members, the and go can't We is we done at in Planet successfully in and Fitness. a we've opening second franchisees can second But a the franchise in a what past, territory, up extremely support our what is territory. do,

growth, we to grows. our forward as awareness how that's see move continuing So

this marketing truth great, weekend the I not narrative like excited, best is We have and an first his sit build with great, of probably behind back the trying location, who's weeks. ambassador, opening thought simple their world, businesses plan. out think coming sophisticated business in but world's we're a more told, And his on with his And and global, great influence the I two extremely is to Beckham, be athlete, opening. extremely FXX the the replicating Adam, an is our well putting money from has by just date this this I And that to spent awareness. been first in London Nikes the importantly global up and who's marketing was where workout. that par model

simple awareness answer, believe do So AUVs as grow grows. we will again, yes

our power in to Adidas continue top what done Nike like of think to lastly, grow that to that past. everything mind continue and need we in awareness. we doing And we're the replicate organizations great Secondly, to have

Randy Connick

want think for years, gives do about for of of curious XXXX kind helpful. just the your on pack, well you say done forward then year, so you where the advance great I purchases, is, few into you that then so the Great, my thing you guys well you XXXX, and that need you going secured next packs of packs, do how last years? for openings strategically same out so to on XXXX, sight following you're your just number and on the to And curious on well the get Thanks, guys. done buy you the you a give securing of your line the think well to and you anticipate them the stage how to question obviously Chris, how you want you're openings kind about guess get going get in to forth going to did in CapEx the

Chris Payne

gone actually XXXX Yes, packs, to we've did purchase just gives us pack we tap and thanks, the Randy. not But to right, of on disclosing well this confidence on stock as about volumes, revolver equipment. CapEx all the we've the contracted that We hand relates well this quite and you're it that out to packs, ensuring well the meet the were that guidance year's have that We for a year. specifically strong we entire year. demand level of have secured

for and of the all lot been a there's production, it's water. on an So audit in more that's it's already all paid arrived,

So it's, we've XXXX. secured

we'll we'll to contracted worth our in expectation months material it's forward, demand chain our But to of six XX we warehouses always ensure locations. supply our landscape. adequate of obviously that assess that levels our stock strategic have on Looking in the probably in to just continue have hand,

Randy Connick

guys. Thanks, Very helpful.

Operator

ahead. from Our Max, from Max next & question comes Cowen go Company. Rakhlenko please

Max Rakhlenko

lot. a Great, thanks

can for that you. the you deals? large Thank large what in but versus signed the XXXX, between XQ? details will for first you provide multiunit do additional then you, maybe smaller Adam, deals you think mix the And So around be one any

Adam Gilchrist

good think capitalized accelerating the well a business it's That's sophisticated, I highly point. first with see We investors. question. Yes, my

can The FXX second that's I greater point that actually mean, a I'll portfolio a office. is, small easier by it's of that, XX. establish than to actually And make operate you head

efficiencies sales, have membership can You with marketing.

I When to numbers to is smaller franchisees. exit. mean, I So, really, small to with in say what franchisees, we're portfolio do continue with an their assist fewer multiunit trying

portfolio with potential the XX XXX over So between to accelerate roll next owners forward months. and I we this we're require would seeing that larger will of XX that franchises somewhere portfolio year ups each. continue a expect And

average and was pause of goes transactions Club the if I of add QX, a and anticipate. look to at with that to was your you major question. way last own the acquisitions The way no has we franchises. XXX XX of is, Chris regard And to let completed QX for as QX, the locations. If though zip again, was Franchise hope I'll portfolio major transaction the that year sort long we again, that portfolio any I that Group some he I code In But there franchises. group prior additional that had completed with color well. a answering would think XX over will across That's forward franchisee I look

Chris Payne

our Yes think that only add is over their of I would has the point studios increased existing I with more franchise XX% in base portfolio. Adam, multiunit

[indiscernible] in detail. to expected we're So the

Max Rakhlenko

is the it normalizing to previously very helpful. just that's Thanks, or curious too tell? bit would big guys. picture to little is a And Great, the business how now similar then still if thought early you it with environment just scaling,

Adam Gilchrist

just my up. Do phone my mind broke that you apologies. repeating Sorry, question,

Max Rakhlenko

Yes, sure.

curious is scaling early still the would to be similar IPO now to the it it how business prior to if too thought or tell? is pre Just you

Adam Gilchrist

we were the we're I that balance that this is but strongest coming our saying And ecosystem, argue Yes, not we of sheet in confidence of in I because level sales, we back the IPO, think with peers. would have I the the high we comparison mean, off announcing interest the would over fitness to blown of that we're being suppose internally believe have. we QX's level

had QX. mentioned, zero at end Chris we debt of the As

that's equipment, our question. We have to so tapped acquire just however, timing a revolver,

amount our So equity, network. also office, speed of confidence sophisticated by breakneck from this and coming entrepreneurs a a into business operated private balancing flying growth. saying there's family conservative fiscally we've that tremendous they're And

have of our Randy's we're to continue doing answer to comes successful power So it franchisee in of It down a the we awareness. had question, inquiry. we that question IPO. fact to your we the unprecedented subscribed to with all growth the business. an to our continue was have. a extremely that debt, and were fiscally half grow responsible And To to echo believe prove relieve amounts are everything is, very And we and lastly, I over four do we balanced to said, like breakneck obviously point, this times able yet we where

Operator

Baird. Jonathan from go next Our from question comes Johnson, Komp please ahead.

Jonathan Komp

Good some in out? profit And highlight the the Could total you the EBITDA Chris, looks that you at the Yes, factors quarter, Thank could margin a the fourth you. can I bit. ask like gross to there? the you maybe when performance come look back hi. franchise contributed of stands then just XXXX it morning. at when strength look total guidance,

fourth could then impact what expecting you the that quarter XXXX, first for the would and So margin? overall just factors highlight you're EBITDA

Chris Payne

Yes, there's really Hi were John, how there. the are of had, margins sure, We gross impressive in you? a couple QX. factors

throughout at and standardized have an if margins That's we've equipment been that. the do we've We just year. continue equipment, undertaken to we're we're initiative to standardized our looking across regions, going that

that, stated quarters mix rebate an of also restart revenue bit time provider. a their we that, to hit And their core franchisees as franchise, based was volume triggered with a addition equipment we franchise little on rebate prior higher metric membership revenue to in that did we membership, open our franchise previously marketing. giving to in manufacturing addition total with In have a was post a the more

of regards higher has franchise franchise margins, percentage represented core margin. we're In have which margin, plus a revenue, to equals which revenue higher we of to represents a that franchise higher revenue, So equipment XXXX mix EBITDA overall a margin. that protecting higher

investing, we actually think are I yes, are sorry. So we

Jonathan Komp

improve just decline would -- just EBIT clarify to expectations are and adjusted there sorry, you total clarify, expecting your what trying to here, are impact And the that? and to expecting you or EBITDA margin

Chris Payne

obviously are off new ground. we getting them Yes, modalities in of the our some investing and

year it our range will comfortable the lower, know, EBITDA implying time. XX% over margins XXXX a up with these will we where and our we've on margin metrics. be be very guidance very may set we're You had comfortable that at but guidance we've expectation the really that a that that is of we're that is slightly the outperformed minimum where And I targets. strong our into in hit we've that we're understand confident guidance all

Jonathan Komp

XXXX Yes, sizable for your generate question ability about cash look EBITDA, in if really you helpful. outflow. positive you other XXXX, to had one in operating then fairly we Thanks had nice on I but adjusted operating And How at XXXX, clarifying. that's should think a cash? that

Chris Payne

of supported related period, it, lot side that that out throughout going the of COVID associated well. IPO in with our difficult and had performing relatively are our a now a at thing a pleasing getting our timeframe. We their was quick of back all is levels obviously of but big and XXXX what franchisees public area done pre-pandemic obviously as and that we obviously lot the had costs well, one a that fee we're yes, franchisees So there relief other was

outflows -- a love spins state. through that factors our capital and much putting more of And a XXXX. very we were that there one cash be obviously time this off year. we're we're flow So that, is increased free were our ton normalized forward work truly We there to to business looking to that think going XXXX cash

Jonathan Komp

Okay, understood. Thank you.

Operator

from Our go Macquarie. Golding next ahead. please Paul, question comes from Paul

Paul Golding

around there would drill Good of secondly, I your these not some congrats marginal time? it's multiunit color out expect terms on to color is much. plus bigger you several how given, your of gross you've XXX margin preorder bit so you you terms world margin world was XX% the much cost were franchisee to runway shaking franchises give opportunities and opportunity? any doing giving in color could packs ordering any inputs XX specific, And than of on worth in quarter. see if versus wanted leverage sales, if you the may I for just just margin year's see wanted preorders in your all how the there if be rising give, in morning. these saying I see units ahead broker think maybe units much worth then the then average what and relative commentary Thanks is if on I and directionally one XXXX, first institutional some to that that, been year, I runway years some Thanks just to this on given think deals packs, opportunity could there's large owner, or give on color per down the equipment a so volume this on of more franchisee I see wanted earlier gross institutional that. XX% was out to you or of wanted could the here,

Chris Payne

the the I'll over hand of and question, part. to I'll Well, take Adam first answer second it to the then part

ordering to two some realize bulk world us cost obviously fitting into three enables defraying which in now some containers, savings. world We're packs that really pack, to regards in of cost increase. So is

our and such manufacturers we in rebate we a bulk in rebate XXXX. a get enables from So and received again year equipment expecting if us volume to this ordering metrics we're hit as certain

every year pieces new equipment that we think margin. our I to the be world increases point protecting will pack is, world of we some we are our adding be price, other will implementing and pack on our and price

today. reduced it's not beyond is So where it

geographies a to XX% forward maintain in our margin future. moving across the will XX% We

not sorry pricing that decrease we're we margins expecting protecting and increase, margin pack our ensure we're will world if that world will pack So with required.

Adam Gilchrist

about in And large the success private we The past, very offices your of had board been in large second very, working cautious to and to and and is assist very buying the Chris. the as question really portfolios. with failure. I've appointed between network we bring performance of part equity [indiscernible] our mentioned our with clutch been on to we've who us regard be of we Thanks, Paul, a number that And have family process.

portfolio anticipate FXX, hundred. explosive are we that greater what doing than a portfolios growth probably this regard this to completing is on year two are sales juggling how many make. I wish closing we and with to So major

XX negotiated over discussions sheets the term have We moment. being and at

sophisticated being highly, believe really these. And that we right, XX in owning want cautious range. yet we're because sort experienced we So of competitive, the that operators is very code zip

worth these cases sophisticated get some buy can in capitalized, million well to $XXX studios. investors So of you aiming

However, they may not have a tremendous experience. of amount

our is a wishing the amount number of inquiry balancing tremendous criteria. a units those to they increase at act extremely it's own. three really And we're between what existing franchisees, the network of currently So moment successful from of seeing that

It with probably there's owns answer. I parts two moving only only three think really, that to Club in may this to bring we're run another major Group parallel three So Franchise be maximum owners really will forward portfolio XXX to two, [ph]. increase never this amount of greater been I as growth demands Number their will network internally then see from a has I suspect ownership. our in we business than current tremendous multiunit lastly, before. mentioned, And

answers three probably, takeaways your I Paul. there's that hope there's and So key question,

Paul Golding

to Yes, after in to is thanks yet just modalities too a up institutional interest? interest so any for guess Have the that much, seen quick get franchisees you equipment Adam. early the thanks new Chris your commentary. Adam. it or And I follow going to answer,

Adam Gilchrist

point. The successful answer is engaging is be And the want modalities that yet. as new to That's first we FXX. I not as my say those reason these conversations we're in

for the driven we really that and we're marketing they're results have that that doing partners in So correct being base the modality. that place, have is tested, what membership sure we plans that stress making into correct

engaging than I open not in modalities XXX zero anticipate on each we're really more franchises in about question, So with be spending going investors a have talking have XXX franchises XXX really institutional to these we modality. or more open. additional time And than until too they once much your then to us

Paul Golding

Great, much. so thanks

Operator

[Operator Instructions] Thank you.

ahead. please Our John Ivankoe from next from question John, go JPMorgan. comes

John Ivankoe

you. the franchise definition Could sorry you of it the October changed? a of mention specifically as there was change thank of elaborate if and missed press you a I Hi, how open, of was release, think I'm the definition X, could I this, elaborate XXXX. In

Adam Gilchrist

can Hi, on now John. one. to appropriately operational I was The open can it that, tell change our you an CRM date. tag in to we rely that related change

a was been to system that we've it realize. So able efficiency

the opens exactly actual the tagging stores the actually for that are it's we now open its operation. date date and So studio

John Ivankoe

Okay.

you just now alluded of and forward. times much how number alluded revenue fourth to only very forward think I that, a you're opening. to margins quarter, it was is XX% numbers number, perfect. its it of due obviously words, this guess, mean, that recognizing guess open other to, it's supplier you credit that high in expecting that's the I it carry I $X,XXX was don't I round a mean Okay, The it that's month, booking couple carry in of I that and rebate? were you're to So receiving grand if before was, basically customers. a Correct? It

Adam Gilchrist

said XX% Yes, it's the XX% normalized think that equipment always John margin range. is, I we've in to

finished stock metrics. based by which yes, XX.X%. hitting So we're certain was, us Obviously placing the above is forward. volumes July commenced the at was The of with And XXXX of negotiation orders so that full manufacturers helped that our large slightly for a year it's and much because volume the we're pulling But we on rebate. rebate reflective now equipment order in volume.

John Ivankoe

Should mean, is new firstly something terms And margin? some about full do stores the guess that about as re-equipped well. of model talk of process at U.S. That's young Could equipment us part purchasing in Australia that? fine. in mean, enforcing stores open I using I Just of the years guys have, certain, of guess the as years your fully the re-equip is expect and a couple system, walk a think new, plus that we I number old. cycle? a in are you final you where question, we package I years that to in through, a of Are but five at your plan? you Australia are a you

Adam Gilchrist

good that our life about franchisees. We Hi a pre-pandemic process for unique has each mandatory however, fact that's -- the of piece equipment a a What's business, John, is that implemented Adam, question. cycle. had unique refresh we was

in example. to kettle literally months. last they battle skipping bell So XX you is is I'll bomb. a to rope, would which a last a an rope, will comparison years comparison in XX nuclear A give which Like XX months

being So price. this what sold we that ongoing you'll all has process at full is, this of find equipment have refresh

have a been been flexible XX-months than more we pre-pandemic. had were the far we anticipated bit, through what for However, a we pandemic, little we've last because

countries, cycle, it equipment, you'll that that equipment. full now on what of their just is has have or world is whether months. mandated the franchisee refresh put same mandate, life in rest the I that and being our So full on depending what, noticed re-implementing it's with be Australia there last every A, U.S. any your for C, we're will XX margin pause the done to the of answers Australia been to piece of is B, which at hope us; that price question paid John. or

Operator

is Q&A of the session That today. the end

I'll management any back team the closing So to you hand remarks. over for now

Adam Gilchrist

excluding been down that and time languages, business take to truly we We're new we thank I this touch we of growing he be and America. and that like this or as throw of extremely the thank to mentioned like point the We is Central Chris few few mandate to this put interesting extremely, have responsible. believe a time a East, fact day world's two to again, pause Asia all time. and at religions, What's grow that try with a let at thank just business, business and the time to you by have South the as reason the are speed, folks your for folks of all and in some. I our Like three the continue of offered, times Yes, for to portable. this deliver it each comments of North to being have Middle breakneck two fiscally ourselves quality And we if, offline. same as and for best about quarters call week, up again wake There's has moving we'd our FXX With Look across, always FXX Chris always excited workout transcend workout. much. and you those we on business peers all geographies, truly whether proving to trains breath on you into and we for it's love the Southeast We do. in and success folks over regions, and it is again because we'd to the the very the call, select [ph] inquiries simple our if to any best world's make these we possible. I'll believe our is I'll available this your franchisees a

Chris Payne

you year Yes. ahead. your I'd just excited Thank really later and forward like analysts chatting looking to with Adam and with and echo about with this I'm the discussing for we're that comments, time your we're today today to to you all as after else, well. I'm up forward the those to coming call for catching over to investors there looking anyone you the out days FXX

much. very you thank So

Operator

This for concludes joining. Thank today's call. you

You lines. may your now disconnect

F45 Training (FXLV) 14 Mar 222021 Q4 Earnings call transcript